I run a small voluntary engineering/robotics group for a handful of high-schoolers, and they come over to my office and engineer/design/build things. At this point, they are well into CAD, CAM, CNC machining, basic electronics, etc and we have discussions on anything technical – electronics, how air-conditioners work, space, website design, etc. Seriously, these kids will now design and CAD a part, then machine it on the CNC mill or lathe. We even do experiments such as making plasma in a microwave, or making pickles glow. This has definitely been a good thing for them, and they get to use my place for any “don’t try this at home” experiments. Properly protected and supervised, of course.
However, I’ve spent literally thousands of dollars on parts/components/materials etc and need some financial relief, so I thought we could solicit donations, perhaps though selling t-shirts through cafepress or similar.
Can I do this, with records showing I have no net gain, or do I have to formally register myself as a non-profit? I know there are other avenues (such as 4H), but I really can’t stomach the paperwork/legal red-tape behind this.
I informally refer to them as “interns”, so perhaps if they’re under my business as such, I can accept donations then? Or would I have to record that as income?
Some aspects of the law vary by state. However, your donors won’t be able to claim their donations (or the non-merchandise portion of their purchase) as charitable donations. Further, presenting your organization as a charity when it isn’t incorporated as such is likely to cause a lot of problems in your state.
Creating a charity for the purposes you mention isn’t THAT big of a hassle. I’d suggest you get Mancuso’s How to Start a Nonprofit Corporation and look through that to see if you want to go further. One of the good things about Mancuso’s book is he discusses the purposes, needs, and direction of nonprofits, providing good food for thought.
Thanks. I am purposely avoiding any official registration (as here in S. Florida it takes ages and lots of red tape to get any simple thing done). They’re only 3 students currently, so not sure how much red tape I can handle for this. If I request donations and clearly state that I’m not a non-profit, donations are not deductible, etc, would that be okay? I have not found much in the way of a formal answer through google yet.
good deal on helping some students out. anything to help this country from getting dumber is good.
IANAL, i would think it would be OK for you to get gifts to help out this project, though without a corporate entity i would think the donations would be gifts either to you or your business.
You also have to watch out for becoming liable for tax on the value of the contributions, revenue, what have you.
Another avenue would be to affiliate with another non-profit and see about taking a tax deduction for what you are providing to them. That might be worth about as much to you as you could expect to raise.
Or you could charge the kids for participation, with the classes being something that your business offers at cost, but not free. Again, this would be revenue.
I would be cautious about referring to the students as interns. Interns in a for-profit business need to be either receiving course credit (participating in some kind of formal course of study) or paid minimum wage.
Just thinking out loud here, not offering legal advice.
In S.Florida you can get a gift affidavit and donations can be taken as a gift. HOWEVER, if you take more than 10k(?) in gifts you need to claim it as income on your taxes.
Either way, I’m not expecting legal advice, but just some direction on other options that would save me from the red-tape. if any of you have sources for any of this you’re quoting me, that would be nice, as I would eventually want formal verification of this, before I do anything.
Who is the correct authority to contact for this, anyway?
The main reason for charitable status is for donors to claim the tax refund. I am sure there are plenty of organizations (i.e. the “River Park Skateboarders”, or your bowling team or softball team) or such) that collect dues, sell things and ask for donations without doing significant accounting. It’s more likely when you hit the thousands of dollars income that the IRS would get interested, which may happen too if you annoy someone like a local business by doing some activity that cuts into his sales. After all, the high school play, when you add up all those tickets and concessions, is probably a large sum (in and out).
The best advice is to get attached to a group that has status, whether it’s the local school, a Y, scouts, or church group; if you need a good name and real accounting help to handle huge donations (and the good name helps for those) then someone like the Boy Scouts helps; a local high school works even better - and a HS club probably does NOT have to include only its own pupils.
This is nice. We’re looking at less than 1k for the next project (an autonomous 4-rotor helicopter with GPS), and about 3k for the one after that (our own Segway-like personal transporter). The first one (first half of this year) cost me about $4k (but that will be mine, so I’ll eat that cost) so we’re still not up to 10k for the year.
BTW, I assume that all components/materials/etc that I purchase will be subtracted from the donations received.
Now the important part – any links to the formal docs explaining this, so I can cover myself legally?
Sadly, the reason I’m doing this is because I used to mentor the high-school robotics club for a couple years (voluntarily as I am not a teacher), but the principal killed the club because in his opinion, it affected the FCAT. The competitions were around FCAT time, but on the weekend when there are no FCAT tests. The principal’s salary is based on the school’s overall FCAT scores, so that’s most probably his motivation, not to have the students distracted at that time. BTW, the kids get no credit for doing well on the FCAT.
Other schools have had this issue and gone to the county school board and received permission, but the principal approves fundraisers, so we did not want to get on his bad side. And I did not want to push it since I don’t even have any kids of my own – the ones I’m working with now were pushing me over the past Christmas holiday to intervene and see if I can get the principal to concede, but instead I came up with this idea, that we could engineer our own gizmos. I’m also re-living my childhood here
Sure, but you have to record the money received as income and is taxable to you. Also, if your expenses associated with these interns is deductible as a business expense, you could deduct it too.
Business income would imply that you have exchanged something of value (services, products, etc.) with the person giving you the money. If they really are just giving it to you, then they can give $13,000 in a year before any tax issues come up. Even then, the tax issues are the giver’s, not the receiver’s.
If you don’t do any paperwork to set up a charity, you risk a couple of problems:[ol]
[li]Donors might have problems deducting their gifts to you from their taxes.[/li][li]Gifts are legally personal gifts to you, and you may need to report them as income on your taxes.[/li][/ol]But … 1 is often not a problem. Givers often don’t itemize their giving in detail, and the IRS doesn’t normally scrutinize this in detail. If they do (like they audit someone who donated to you), you might have to help them show the IRS that you are doing a charitable function. And if the IRS won’t accept that, usually all they do is disallow the deduction from the giver – no major penalties assessed.
And 2 has a fairly high limit in most states; I think $10,000 is common. So if your donations are under that, it doesn’t affect your personal taxes.
P.S. You might look into talking to an already existing charity organization about becoming a “fiscal agent” for you. This is common for ‘start-up’ charities.
Properly protected and supervised, of course.